Any question of what business sector is — and is not — profitable at Ford is no longer a mystery.
Ford lost about $3 billion on its EV and digital services business over the past two years, a unit now known as Model e, and isn’t expected to be profitable (on an adjusted basis that removes costs like taxes) until late 2026 with an 8% operating profit margin, the company said Thursday. Meanwhile, its commercial and traditional internal combustion engine business units were profitable enough to offset losses incurred by making and selling electric vehicles.
In other words, profits generated from selling internal combustion engine-powered trucks, cars and SUVs have helped, and will continue to help, drive Ford’s push into EVs.
Ford lifted the hood Thursday on how the restructured 119-year-old company will operate and, importantly, report its financials. Earnings reports, which Ford restated for 2021 and 2022, will no longer be broken out by region. Instead, financial reports, which includes revenue, profits and losses, margins and adjusted earnings, will give details on three global segments of business that cover EV and digital services, traditional internal combustion engine business and its commercial vehicles.
And while CFO John Lawler stressed to TechCrunch that this is not merely an accounting exercise, the numbers do provide fresh insight into the company’s financial standing.
“If we just did business as usual, I think what we felt is that the company wouldn’t change enough, the dynamics within the company would not have changed,” Lawler said in a recent interview explaining the decision to restructure. “It’s about focus. It’s about speed and accountability. And I don’t think we would see the clock speed increasing.”
Last March, Ford announced plans to restructure and break the company into three segments: Ford Blue for its internal combustion and hybrid vehicles, Ford Pro for the commercial business and Ford Model e, which covers electric vehicles, advanced driver assistance systems and digital services. The newly formed Latitude AI, which is part of the ADAS team led by Sammy Omari, also falls under Ford Model e. The newly restructured company and its accompanying financials also breaks out Ford Credit, the company’s financing arm and Ford Next, which is where its longer-term pre-revenue businesses sit.
The upshot? For now, the EV and digital services business, which Lawler said should be viewed as a startup, is unprofitable while the other two are gaining ground, on an adjusted earnings basis.
As a recap, Ford reported in February that on an adjusted basis it earned $10.4 billion for all of 2022. Ford’s net income on an adjusted earnings before interest and taxes in 2021 was $10 billion. On Thursday, Ford issued the restated earnings, which shows the Model e unit had losses of $900 million in 2021 and $2.1 billion in 2022. Ford currently has three EVs in its portfolio: the Mustang Mach e, the F-150 Lightning truck and the commercial transit van.
Meanwhile, Ford Pro saw profits increase from $2.7 billion in 2021 to $3.2 billion in 2022. Ford Blue brought in the bulk of profits, earning $3.3 billion in 2021 and jumping to $6.8 billion in 2022.
The automaker forecast that its Ford Blue unit will earn, on an adjusted basis, $7 billion in profits in 2023. Ford Blue will approach $6 billion in profits, nearly double its 2022 earnings. And Model e, the EV and digital services unit, is forecast to lose $3 billion in 2023, a loss driven by a number of capital projects including building new factories such as the $5.6 billion BlueOval city complex in Tennessee.
Those costs also include work on future generations of EVs. Lawler said in a recent interview that the company is working on second, and even third-generations of its EVs.
“We’re working on our second generation that launches mid decade,” Lawler said. “It’s a clean sheet of paper. It’s a completely different way of designing the vehicles. And in fact, we’re already working on our third generation when most of our competitors are just launching their first generation of vehicles. And so I think that puts us in a in unique position.”
The company reiterated that Ford Model e will reach profitability before taxes by late 2026 with an 8% pretax profit margin. That milestone that is tied to planned EV production run rates of 600,000 units by the end of 2023 and two million by the end of 2026. Ford also confirmed that it expects full-year adjusted EBIT to be $9 billion to $11 billion and adjusted free cash flow to be about $6 billion.
If Ford wants to hit those metrics, it will mean more than just producing and selling EVs. The company has struggled to keep its costs under control and improve operating efficiencies — a problem that many of its rivals have mastered.